2021 (10) TMI 1285 - AT - Central Excise

Tribunal allows appeal, cancels demand & penalty, maintains credit reversal.

The tribunal allowed the appeal, setting aside the demand of 10%/5% of the value of exempted goods, the extended period for demand, and the penalty. The ... CENVAT Credit - manufacture of dutiable as well as exempted goods - P&P medicines, falling under the chapter 30 of the Central Excise Tariff Act, 1985 - requirement to pay 10%/5% of the value of exempted goods in term of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 - time limitation - interest - penalty - HELD THAT:- Once the assessee reversed the proportionate credit in respect of input and input services attributed to the exempted final product and paid interest if any for the delayed reversal no further demand such as 10%/5% of value of the exempted goods can be raised. The appellant have argued that during the relevant period the retrospective amendment in Cenvat Credit Rules vide Section 73 Finance Act, 2010 was inforce according to which only proportionate credit along with interest was supposed to be reversed. It is found that even as per the said amended provision there is no substance in the case of the department for demanding 10%/5% of the value of the exempted goods. Time Limitation - HELD THAT:- Since the appellant have been declaring the details of cenvat credit availed even in respect of common input services used for the manufacture of dutiable as well as exempted goods in their records and also filed ER-1 Return wherein the availment of cenvat credit was disclosed, no suppression of fact or willful misstatement, fraud or collusion or contravention of provision to evade payment of duty can be attributed to the appellant. Therefore, the demand of extended period is not sustainable also on the ground of limitation. The demand of an amount equal to 10%/5% of exempted value is not sustainable. Interest - penalty - HELD THAT:- The appellant has reversed the credit amount of ₹ 21,95,293/- along with interest which is maintained and remaining demand and interest there on, and entire penalty are set aside. Appeal allowed. Issues Involved:1. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004.2. Reversal of proportionate Cenvat credit and its compliance.3. Retrospective amendment of Rule 6 of Cenvat Credit Rules, 2004 by Section 73 of Finance Act, 2010.4. Invocation of extended period for demand.5. Imposition of penalty and interest.Detailed Analysis:1. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004:The department's case was based on Rule 6(3)(i) of the Cenvat Credit Rules, 2004, requiring the appellant to pay 10%/5% of the value of exempted goods. The tribunal found that once the appellant reversed the proportionate credit and paid interest, the situation is as if no Cenvat credit was availed from the date of availment. Therefore, the department cannot demand an amount equal to 10%/5% of the exempted final product. The appellant has the option to either pay 10%/5% or to pay proportionate Cenvat credit attributed to the exempted final product.2. Reversal of Proportionate Cenvat Credit and Its Compliance:The appellant reversed the proportionate credit amount of Rs. 21,95,293/- and paid interest thereon. The tribunal held that the reversal of proportionate credit and payment of interest complies with Rule 6(3)(ii) of the Cenvat Credit Rules, 2004. The tribunal cited several judgments, including 'Himmat Glazed Tiles- 2018 (15) GSTL 486 (Guj.)' and 'Welspun Corp. Ltd – 2019 (368) ELT 179 (Tri. Ahmd)', which support the view that once proportionate credit is reversed along with interest, no further demand under Rule 6(3)(i) can be raised.3. Retrospective Amendment of Rule 6 by Section 73 of Finance Act, 2010:The appellant argued that Section 73 of the Finance Act, 2010, retrospectively amended Rule 6 of the Cenvat Credit Rules, 2004, allowing the assessee to proportionately reverse the credit taken on common inputs/input services. The tribunal agreed that the appellant had complied with the retrospective amendment by reversing the proportionate credit along with interest. The tribunal noted that the failure to make an application before the jurisdictional Commissioner is a procedural lapse and does not deprive the appellant of the benefit of the retrospective amendment.4. Invocation of Extended Period for Demand:The tribunal found that there was no suppression of fact as the appellant had recorded the details of availment of Cenvat credit and clearance of exempted goods in their books and monthly ER-1 Returns. Therefore, the invocation of the extended period for demand was not sustainable.5. Imposition of Penalty and Interest:The tribunal held that since the appellant had reversed the proportionate credit along with interest, the imposition of penalty was not justified. The tribunal set aside the penalty and maintained the reversal of credit amount of Rs. 21,95,293/- along with interest.Conclusion:The tribunal allowed the appeal, setting aside the demand of 10%/5% of the value of exempted goods, the extended period for demand, and the penalty. The reversal of proportionate credit along with interest was maintained, and the appeal was allowed with consequential relief in accordance with the law.